Understanding the basics of annuities, from types to tax benefits, can help you make an informed decision that's right for you.
Article: 5 minutes
Updated: January 8, 2026 Published: October 16, 2015
By: Mikel Van Cleve, CFP® Reviewed by: Editorial contributors
USAA Life Insurance Company and USAA Life Insurance Company of New York.
Because annuities are insurance contracts that provide a guaranteed income, often after retirement, some people assume they only make sense for seniors, or that they're too complex.
But when used correctly, annuities can be a solid part of your retirement package. Here, the USAA Life Insurance Company and USAA Life Insurance Company of NY share some common misconceptions, explanations and potential benefits of annuities.
Video Duration: 1 minute 35 seconds
Description of visual information: [USAA Life Insurance Company and USAA Life Insurance Company of New York] End of description.
Retirement may seem far away, but it's smart to plan ahead.
You're doing the right thing by saving and researching your options, but the ups and downs of the market can leave you unsure about protecting your hard earned savings.
Is it possible to get secure protected growth over time? Yes, with the USAA Fixed Guaranteed Growth annuity.
With a USAA Fixed Guaranteed Growth Annuity, or FGG annuity, you'll be on a path to smooth, predictable growth.
You choose a term typically 3, 5, or 10 years. Your money earns a guaranteed competitive interest rate for that entire period. Your money is saved from market ups and downs, and you'll know exactly how much it'll grow. That's peace of mind you can count on.
Another benefit is tax-deferred growth. The interest your annuity earns isn't taxed until you withdraw your money. This lets your earnings compound and grow without being reduced by yearly taxes.
And when you do take money out in retirement, your tax rate may be lower, which could save you money.
When you're ready to turn your savings into retirement income, your FGG annuity gives you a flexible option.
You can convert all or part of your savings into an immediate annuity. This gives you the same guaranteed income stream for life or a set period just like a SPIA.
Start living your best retirement with the USAA FGG annuity. To get guidance you can count on, speak to a USAA retirement income specialist today.
Description of visual information: [Guarantees apply to certain insurance and annuity products and are subject to product terms, exclusions and limitations and the insurer's claims-paying ability and financial strength.
An annuity is a long-term insurance contract issued by an insurance company designed to provide a retirement income stream for life. Once the contract principal is converted into an income stream, you will no longer have access to your principal as a lump sum. Terms, conditions, limitations and surrender charges may apply.
USAA and its affiliates do not provide tax advice. Taxpayers should seek advice based upon their own particular circumstances from an independent tax advisor.
Fixed Guaranteed Growth (FGG): Forms ICC2398732 06-23, ASP98784CA 10-18, ASP98783FL 06-23, NSP98868NY 10-18. FGG Renewal Endorsement: ICC25509339 04-25, ASP503778ST 12-25, ASP509339SC 04-25. Renewal Endorsement is not available in California or New York.
Learn about USAA's use of Artificial Intelligence at usaa.com/ai.
Life insurance and annuities provided by USAA Life Insurance Company, San Antonio, TX and in New York by USAA Life Insurance Company of New York, Highland Falls, NY. All insurance products are subject to state availability, issue limitations and contractual terms and conditions. Each company has sole financial responsibility for its own products.] End of description.
Fact: While individual plans may differ, annuities come in two basic forms: immediate and deferred. An immediate annuity generally requires a buyer to pay an initial lump sum to an insurer, who guarantees monthly payments beginning now and ending at a particular time, often at the individual's death. A deferred annuity delays payouts until a later date of your choice.
Fact: Immediate annuities can guarantee monthly payments for your life, or as long as specified. Some people choose a guaranteed payment period that continues until their spouse's death. Others choose to allow payments to continue until all of the initial investment has been paid back to them or their beneficiary, regardless of their death.
Fact: Deferred annuities can provide a unique blend of features, including:
Fact: While this may be true for some types of specialized annuity products, immediate and deferred fixed annuities generally don't carry high commission costs. Still, before purchasing any annuity, you should understand your situation, the annuity contract under consideration, and whether it's in your best interests without any sales pressure.
Fact: Younger generations are also seeing the benefits of annuities.
Fact: In 2021 life expectancy at birth, was 73.5 years for males, and 79.3 for females. However, averages can be deceiving depending on your own health and background, and how old you are now. Let's assume you're already age 65 and retired, non-smoker and in average health. A 65-year-old male has better than a 50% chance of living until age 85. A 65-year-old female in the same condition has more than a 60% chance of living until age 85. And, if these two are a married couple, there's about a 34% chance at least one of them will live until age 95.
Therefore, depending on your current age and overall health, it may be a good idea to plan beyond averages.
Fact: You may be able to move an annuity tax free using IRA rollovers and tax free exchanges under IRS rules. Federal tax rules and surrender charges may apply.
Let us help you see if an annuity might be right for you.